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The Master Stock Market Outlook Revealed

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The markets are floating higher on the day. The SPDR S&P 500 ETF (NYSE:SPY) is trading at $122.86, +1.18 (+0.97%). The ADP Private Sector Employment numbers were released this morning at 8:15am ET. They came in with a gain of 91,000. This number was solid and the markets liked it. However, all eyes are on the Federal Reserve for their next meeting on September 21st and 22nd. Ben Bernanke made it clear last week at Jackson Hole that there was likely new easing coming to the United States, in some form. The markets, much like a drug addict, cheered these comments. While economic data will continue to flow towards that meeting, the markets will continue to look forward to QE3. The Federal Reserve is going to have to live up to some major policy announcements. Should they not deliver, the markets may see some major downside in September.

The rally has been solid so far. Since last Friday's low, the markets have jumped 8.5%. Short term, this is an extended move but unlikely to see a major drop in the near term. Consolidation in the form of a pause is most likely. The outlook continues to be bullish for the markets with a random down day thrown into the mix. The SPY continues to have an upside target of $124.40, then $126.25. The upside will also be aided by the coming Labor Day Holiday weekend. Holiday weekends often see a float on light volume on either side. This must be taken as the likely scenario.

While the markets look to continue higher for the next week or two, the easy gains are definitely already in. The markets likely only have another 3% upside potential. In addition, the markets will not see their 52 week highs again. On the SPY, this level was $137.18. The upside rally will last until September 9th, 2011. After that date hits, downside could come quickly at any point in the following two weeks.